Once-acclaimed medtech start-up Theranos’s fall from grace was one of the highest-profile cases of alleged fraud the healthcare industry has ever known. As the Wall Street Journal published a series of startling exposés revealing fraudulent behaviour and management incompetency at the heart of the organisation, its foundations promptly began to crumble.
Theranos claimed its technology was able to run a wide range of blood tests from a finger prick test, with just as much accuracy as a traditional test. The samples were collected inside a device called a nanotainer, which was then processed within a device called the Edison machine. But these claims were false and the technology didn’t work, with Theranos executives accused of repeatedly lying to and gaining hundreds of millions of dollars from investors to keep funding its operations.
Many of the tests Theranos claimed to have performed using its Edison machine were actually performed using traditional blood testing machines bought from rival companies, and it emerged that the Edison machines themselves did not yield particularly accurate results.
The company’s founder and former CEO Elizabeth Holmes and former president Ramesh ‘Sunny’ Balwani are now facing major criminal charges, which could land them each with up to 20 years in prison. Below is a timeline tracking Theranos’s dramatic decline from health tech hype to lawsuits and criminal charges.
2003: Stanford dropout Holmes founds Theranos
Aged just 19, Holmes dropped out of Stanford’s School of Engineering to start building Theranos. Her pitch was to revolutionise the multi-billion dollar blood testing industry by making procedures cheaper and more convenient. She aimed to develop a test which could detect health problems just as quickly and accurately as a traditional blood test using only a few drops of blood from a finger prick.
2004-2010: Theranos thrives with early funding
Holmes’ company raised $6.9m in early funding soon after its foundation, gaining a $30m valuation. By 2007, Theranos’s valuation hit $197m after it raised another $43.2m in early-round funding. Just three years later, in 2010, the company was valued at $1bn. In July of that year, the company told the US Securities and Exchange Commission (SEC) in a filing that it had raised $45m by selling equity and options, warrants or other securities.
September 2013: Theranos goes public, partners with Walgreens
Having kept a low profile for the previous decade to focus on research and fundraising, Theranos unveiled its website and introduced itself to the world through a series of media features. A deal with Walgreens commercialised Theranos’s tests, establishing a Theranos Wellness Center in its Palto Alto store where consumers could access the technology.
2014: Theranos’s value skyrockets, but doubts creep in
Fortune magazine announced that the company had raised $400m in equity sales and was valued at over $9bn. With a 50% stake in the company, Holmes was now a multi-billionaire. But 2014 also brought the first suspicions of the company’s claims, with a New Yorker profile of Holmes describing her explanations of Theranos’s technology as “comically vague”.
February 2015: Criticism from the medical community
An article in the Journal of the American Medical Association criticised Theranos for failing to publish any of its research in peer-reviewed medical journals.
July 2015: Continued expansion
Theranos’s test for detecting herpes siplex virus 1 was approved by the US Food and Drug Administration (FDA). The same month, Capital BlueCross, a Pennsylvania insurer with 725,000 customers, chose Theranos as its preferred lab work provider. The company was valued at $10bn.
15 & 16 October 2015: Carreyrou’s first damning report
Wall Street Journal (WSJ) reporter John Carreyrou published a scathing article criticising Theranos. Following interviews with ex-employees, Carreyrou alleged that, alongside incompetent management policies, the company had drastically overstated the capabilities of its technology. The article revealed that only a small fraction of Theranos’s blood testing had been completed on its Edison machines, and that the majority of tests had been processed through competitors’ equipment.
Holmes made multiple media appearances attempting to defend the company, claiming Theranos had been able to supply over 1,000 pages of documentation refuting Carreyrou’s allegations. The damage control was not particularly successful, and the next day WSJ reported that Theranos had been forced to suspend the use of its nanotainer for all but one type of blood test.
27 October 2015: FDA releases reports
The FDA released two partially redacted Form 483 reports from an ongoing investigation into Theranos, stating that the company had used uncleared and unsuitable medical devices to run its blood tests.
November 2015: Safeway deal folds
A deal with US supermarket conglomerate Safeway worth $350m fell through. Safeway had spent money to build Theranos testing facilities in over 800 supermarkets, but the blood-testing company had failed to meet key deadlines for rollouts and Safeway executives no longer trusted the validity of the product, so the project was pulled.
December 2015: Carreyrou strikes again
The Wall Street Journal reported that Theranos had rigged its tests to produce better results, alongside further management ineptitude.
January 2016: A threat to patient health
A letter was released by the Centers for Medicare & Medicaid Services (CMS) stating that Theranos’s Newark, California lab posed an “immediate jeopardy to patient health and safety”. Theranos responded stating that the CMS investigation took place months prior to the publication of the letter and did not reflect the current state of the lab.
However, Walgreens still stopped all testing at its Theranos Wellness Center in Palo Alto and stated that it would not be using the Newark lab until further notice.
October 2016: One of Theranos’s largest investors sues
Partner Fund Management (PFM), one of the largest investors in Theranos, accused the company of securities fraud “through a series of lies, material misstatements and omissions”. PFM invested $96.1 million in Theranos’ Series C-2 round in 2014.
2017: Theranos settles with CMS and PFM
Theranos settled with CMS in April 2017, agreeing to stay out of the blood-testing business for two years in exchange for civil monetary penalties of only $30,000. A month later, the company published a press release stating it had resolved its legal dispute with PFM.
March 2018: Theranos is charged with massive fraud
The SEC charged Holmes and former Theranos president Ramesh ‘Sunny’ Balwani with “raising more than $700m from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance”.
Holmes was stripped of her control of the company and forced to return millions of shares to investors, and was barred as serving as an officer or director of any public company for the next ten years.
June 2018: Holmes and Balwani indicted
A federal grand jury indicted Holmes and Balwani with total of 11 criminal charges: two charges of conspiracy to commit wire fraud and nine charges relating to actual wire fraud. Holmes stepped down as Theranos’s CEO but remained on the company board.
September 2018: The end of Theranos
Theranos was unable to find a buyer and was forced to close. It announced it would pay off its creditors with its remaining funds.
January 2019: Justice Department assesses
The US Justice Department is reviewing nearly 17 million pages of documents concerning the case, with the potential for more charges to be brought against Holmes, Balwani and other parties involved.
June 2019: Trial scheduled
US district judge Edward J. Davile announced that jury selection for Holmes and Balwani’s trial will begin on July 28 2020, with the trial taking place in August.